Hansen v. Western Progressive LLC
2:15-cv-01426
| E.D. Cal. | Aug 11, 2016Background
- Hansen purchased a Rocklin, CA residence with a $576,000 mortgage; Deed of Trust recorded in 2006 listing MERS as beneficiary nominee.
- Assignments and substitutions were recorded: WMC → Mellon (assignment by MERS, 2009); trustees substituted ending with Western Progressive as trustee; Ocwen served as loan servicer.
- Western recorded a Notice of Default (Oct. 2014) and a Notice of Trustee’s Sale (June 2015); foreclosure sale set for July 23, 2015.
- Hansen sued (July 6, 2015) asserting: breach of contract, violation of the Fair Credit Reporting Act, violation of the Homeowner’s Bill of Rights (Cal. Civ. Code § 2924.17), and negligent misrepresentation, all premised on defendants lacking authority to foreclose.
- Defendants moved to dismiss under Rule 12(b)(6). The court granted dismissal with leave to amend, concluding Hansen failed to allege particularized facts showing lack of authority or standing to challenge securitization/assignment.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Authority to foreclose | Hansen: assignments/transfers were invalid; Mellon is not bona fide owner so Western/Ocwen lack authority to foreclose | Defendants: nonjudicial foreclosure statutes provide the remedy; public records show assignments and substitutions; plaintiff lacks grounds to judicially challenge authority | Court: Plaintiff failed to plead particularized facts; nonjudicial foreclosure scheme precludes such collateral challenges; dismissal granted with leave to amend |
| Standing to challenge securitization/PSA | Hansen: even if Mellon was beneficiary, the PSA is void as to him and he is an intended beneficiary able to enforce it | Defendants: Hansen is not a party or investor in the PSA and lacks standing to enforce or attack securitization | Court: Borrower not a party/beneficiary to PSA; lacks standing to challenge securitization or use PSA breaches to block foreclosure |
| Need to plead prejudice from alleged invalid assignments | Hansen: invalid assignment voids transfer and creates unlawful encumbrance | Defendants: even if transfers were irregular, borrower’s obligations unchanged; the injured party would be the purchaser/holder of note, not borrower | Court: Plaintiff failed to show prejudice; invalid transfer does not alter borrower’s obligations; challenge is improper |
| Sufficiency of pleading under Rule 8/Twombly/Iqbal | Hansen: general allegations that defendants haven’t shown authority suffice to put question before court | Defendants: plaintiff must plead factual allegations raising claim above speculative level | Court: Conclusory allegations insufficient under Twombly/Iqbal; dismissal appropriate but with leave to amend |
Key Cases Cited
- Moeller v. Lien, 25 Cal. App. 4th 822 (1994) (California’s nonjudicial foreclosure statutory scheme is comprehensive and governs power-of-sale foreclosures)
- I.E. Associates v. Safeco Title Ins. Co., 39 Cal. 3d 281 (1985) (statutory scheme covers every aspect of the power of sale in a deed of trust)
- Gomes v. Countrywide Home Loans, Inc., 192 Cal. App. 4th 1149 (2011) (borrower may not judicially challenge the identity/authority of the foreclosing party absent particularized factual allegations)
- Fontenot v. Wells Fargo Bank, N.A., 198 Cal. App. 4th 256 (2011) (nonjudicial foreclosures are presumed regular; burden to rebut rests with challenger)
- Jenkins v. JP Morgan Chase Bank, N.A., 216 Cal. App. 4th 497 (2013) (borrower lacks standing to enforce or benefit from alleged breaches of a PSA; borrower is not injured by transfers between note holders)
- Arabia v. BAC Home Loans Serv., L.P., 208 Cal. App. 4th 462 (2012) (third-party borrower cannot rely on PSA breaches to challenge servicer’s authority to foreclose)
- Glaski v. Bank of America, N.A., 218 Cal. App. 4th 1079 (2013) (recognized as a minority rule permitting certain chain-of-title challenges to securitized mortgages)
- Bell Atlantic Corp. v. Twombly, 550 U.S. 544 (2007) (complaint must plead factual content sufficient to state a plausible claim)
- Ashcroft v. Iqbal, 556 U.S. 662 (2009) (legal conclusions couched as allegations need not be accepted; factual plausibility required)